Click to read the original article for details. Recently, fresh food e-commerce has seen a wave of closures across the country. The Hema Fresh store at a plaza in Kunshan New City operated for less than eight months. Yesterday, when reporters visited, the store was already empty. This is understood to be the first store closure since Hema Fresh opened three years ago. It is understood that the commercial complex officially opened on September 28 last year, and the only supermarket it brought in was Hema Fresh. After operating for about seven months, Hema Fresh announced that the store would cease operations from May 31 this year. A staff member at the plaza's management office said that all goods had been removed as early as May 23, stating, "It doesn't quite meet the consumption needs of our market. The surrounding area is mostly working-class people with monthly salaries typically between 5,000 and 8,000 yuan, while Hema's positioning is a bit higher." Data shows that currently, more than 15% of total retail sales of goods in China are conducted online, but fresh produce online accounts for less than 3%. This gap has led various e-commerce companies to see new profit growth points. Since the end of 2017, major e-commerce giants including Suning, Alibaba, JD.com, and Meituan have entered the fresh food market, increasing their offline store openings and adopting a model of "online + offline, dining + supermarket" to explore the market. The delivery radius and time for these fresh food supermarkets are similar, generally within 3 kilometers and 30 minutes delivery. Even so, yesterday at another Hema Fresh store in Kunshan, reporters found that because the store focuses on seafood, most consumers still prefer to shop in physical stores. One consumer said, "They have to pick goods within 10 minutes and deliver within 30 minutes, so they just grab anything randomly, not as carefully as I would choose myself." Another added, "Between the two, I prefer to come to the store myself, after all, seeing is believing." This first store closure in three years for Hema Fresh is not an isolated case. On April 16 this year, Meituan's new retail format, Xiaoxiang Fresh, announced the closure of its stores in Wuxi and Changzhou. Earlier, SF Preferred, SF Express's new retail brand, also closed stores in Wuhan, Qingdao, Chengdu, and Shanghai. In addition, JD 7FRESH's expansion has repeatedly slowed down... Since the concept of Internet+ was born, Internet people seem to have found a hammer and see everything as nails, believing that every traditional industry can be internetized, and traditional retail is no exception. But new retail supermarkets represented by Hema Fresh do not have network effects; no matter how popular one store is, it does not benefit another store. Where is fresh food e-commerce headed? At another Hema Fresh store in Kunshan, customers came and went. When asked about the business, a staff member said bluntly: "No matter what, location is very important. This Hema store is doing the best because there are more young consumers in this area, and overall it is mid-to-high-end." The Hema model's over-reliance on location and inability to form network effects is due to the static relationship between supply and demand. First, the store is fixed, and second, the user's location is basically fixed. People mainly consume Hema at home, and each Hema user has only one home. Unlike food delivery users, who can order from home, office, or while traveling, a single user's demand can grow exponentially. When there is no dynamic relationship between supply and demand, transaction variables are small, making it difficult to scale. Industry insider Chen Yuyan said: "Delivery within 3 kilometers has its flaws, especially for fresh products. You can't just leave them at the door; you must arrange a time for face-to-face delivery. This is time-consuming, and one person can handle at most 50 orders a day, which is already very busy." The Hema model is essentially unrelated to the internet economy; scale effects can only be achieved by continuously opening stores, especially in prime locations. Since its inception, Hema has performed well: in three years, it has opened 150 stores and incubated sub-brands such as He Xiaoma, Hema Cai Shichang, Hema F2, and Hema Xiaozhan, for multi-format layout. Unfortunately, each new Hema Fresh store is like starting a business from scratch; the performance of a new store has no necessary relationship with whether the total number of stores is 1 or 1,000. "Fresh produce is very localized. For example, Suzhou people like to eat certain things at certain seasons, and this cannot be replicated nationwide. So even if you open hundreds or thousands of chain stores across the country, you cannot use a copy-paste model between cities," Chen Yuyan analyzed. Fresh produce is the most difficult part of retail. Many offline physical stores need long-term experience accumulation to do well. Fresh food incurs high costs in logistics, loss, and packaging. An industry insider calculated that the cost of fresh food e-commerce generally accounts for 30%-40% of the total price, while the gross profit of fresh food wholesale is only 10%-20%. High costs make fresh food e-commerce basically unprofitable, and few companies in the industry dare to claim profitability. Industry expert Zhang Ying believes: "Future competition in fresh food e-commerce will be technological. Technology is about how to improve efficiency in the fresh food chain: using technology to solve logistics and warehousing problems, minimizing time, storage, and loss, and delivering to consumers in the fastest way. In this process, we can achieve profitability." Industry expert Zhao Ping suggested: "For fresh food stores to achieve profitability, two things must be done. First, traffic conversion: fresh produce indeed increases traffic, but can this traffic be converted to purchase high-value-added and high-profit products? If so, the conversion is successful. Second, cross-selling fresh produce with other products, especially achieving online-offline interaction. I believe this way, from offline to online, fresh food e-commerce can eventually achieve profitability." Source: SBS Kan Suzhou